M/s. Rahul Foundations vs M/s. Chaitanya Builders and Leasing Private Limited

Mr. N. Sathish Kumar, J. - The suit is filed for recovery of sum of Rs.32,77,718.14P due and payable with future interest thereon.

The brief facts of the case of the plaintiff company are as follows:

(i) The plaintiff company is engaged in building contract work from 1995 onwards. The company was awarded a Work Order for putting up a Commercial Project at Rayapettah High Road on 13.11.2006 for the value of Rs.1,17,98,260/- by the defendant. The said work order was finalised and signed by both the plaintiff company and the defendant company. According to the plaintiff company, at the time of commencement of work, the plaintiff company was assigned certain supplementary works by way of Work Orders dated 2.11.2007 and 13.11.2007 for additional work in the very same project for the value of Rs.3,83,300 and Rs.6,96,100/- respectively. According to the plaintiff company, the entire project was completed and the building was handed over to the defendant company, as per the specifications of the defendant company during March 2008 itself and a final bill was also raised for a sum of Rs.14,97,978.41. However, in the said final bill, the retention amount in terms of work orders amounting to Rs.7,36,783/- was not included. While so, a letter was issued by the defendant company on 14.06.2008 stating that only a sum of Rs.1,35,439/- alone was due and payable as per their company''s account.

(ii) According to the plaintiff company, on 25.06.2009 they sent a final and revised bill for a sum of Rs.16,09,781.14P, which includes the retention amount due and payable to the plaintiff company, after deducting a sum of Rs.5,72,848.67 p, being the amount deductible for payments directly given to some of the sub contractors of the plaintiff company while carrying out the final works in the said project. However, till date, the defendant company did not settle the amount. Hence, the plaintiff company issued a legal notice dated 9.4.2011 calling upon the defendant company to settle the amount due to them to the tune of Rs.32,77,718.14 p. Since the defendant company sent a reply denying the liability, the plaintiff company have filed the present suit.

The case of the defendant company, in nutshell, is as follows:

According to the defendant company, the suit is barred by limitation. Since the plaintiff company had raised a final bill on 10.6.2008, the suit ought to have been initiated within a period of 3 years i.e. on or before 10.06.2011. But for the reason best known to the plaintiff company, they have filed the suit for recovery of money only on 23.06.2011. Since the plaintiff company did not carry out the work as per the specifications in the work order, the defendant company had incurred huge cost for rectification of the defective work done by the plaintiff company. Therefore, the defendant company debited the said amount from the account of the plaintiff company after due intimation to them. Further, according to the defendant company, there was a huge delay in handing over possession of the building by the plaintiff company. The plaintiff company, by letter dated 25.6.2008, had also agreed about the sub-standard work. According to defendant company, they had paid all the sums due and payable for the works carried out by the plaintiff company, pursuant to the work orders dated 13.11.2006, 2.11.2007 and 15.11.2007 and hence, there is no balance due and payable to the plaintiff company. Thus, the defendant company prayed for dismissal of the suit.

On the above pleadings, originally, this Court, on 29.06.2012, has framed the following issues:

"1. Will the revised bill dated 25.06.2008 give rise to any cause of action and it is so, whether the suit claim is barred by limitation?

Whether the plaintiff is entitled to the relief of recovery of a sum of Rs.32,77,718.14P. with interest thereon at the rate of 24% per annum?

Is not the defendant entitled to debit the cost of rectification from the plaintiff''s account? and

to what other relief the plaintiff entitled?"

On the side of the plaintiff company, P.W.1 was examined and Exs.P1 to P9 were marked and on the side of the defendant, D.W.1 was examined and Exs.D1 to D6 were marked. The details of the documents are hereunder:-

Exhibits produced on the side of the plaintiff company:

S. No.

Exhibits

Date

Description of documents

1

P-1

13.11.2006

Xerox copy of the work order sent by the defendant to the plaintiff

2

P-2

02/11/07

xerox copy of the supplementary work order sent by the defendant to the plaintiff

3

P-3

15.11.2007

xerox copy of the supplementary work order sent by the defendant to the plaintiff

4

P-4

14.06.2008

xerox copy of the letter sent by the defendant to the plaintiff

5

P-5

25.06.2008

xerox copy of the letter sent by the plaintiff to the defendant

6

P-6

09/04/11

Legal notice issued by the plaintiff''s counsel to the defendant

7

P-7

05/05/11

Reply notice sent by the defendant''s counsel to the plaintiff

8

P-8

10/06/08

RA Bill No.8

9

P-9

20.11.2006

Letter sent by the plaintiff to the defendant

Exhibits produced on the side of the defendant company:

S. No.

Exhibits

Date

Description of documents

1

D-1

16.11.2012

Extract of the minutes of the meeting of the Board of Directors

2

D-2

05/04/06

Xerox copy of planning permit

3

D-3 series

20.08.2007

Series of re-bound hammer-tests conducted on the project

4

D-4

21.04.2008

Xerox copy of the letter received from the owners of the property to the defendant

5

D-5

02/01/12

Letter of authorisation

6

D-6

14.06.2008

Xerox copy of letter sent by the defendant to the plaintiff

Witnesses examined on the side of the plaintiff company:

P.W.1. - Ravi Krishna Kumar

Witnesses examined on the side of the defendant company

D.W.1 - Y.Nazeer Ahmed

Heard, Mr. K.V. Babu, the learned counsel appearing for the plaintiff company and Mr. Roshan Balasubramanian, the learned counsel appearing for the defendant company and perused the records.

The learned counsel for the plaintiff company submitted that the plaintiff company were engaged in building contract work and that, they were given work orders by the defendant company on 13.11.2016 for the value of Rs.1,17,98,260/-. The learned counsel for the plaintiff company further submitted that the supplementary contracts were also given to the plaintiff company and that the same were also completed and raised a bill for Rs.14,97,978.41p without including the retention amount. Thereafter, on 25.06.2008, the plaintiff raised a revised bill after including retention amount as per the terms of the work order and sent to the defendant. Therefore, it is the submission of the learned counsel for the plaintiff company that the present suit, which has been filed within three years from the date of the revised bill, is well within the period of limitation.

It is the contention of the learned counsel for the plaintiff company that the alleged breach of obligations on the part of the plaintiff company has not been established. Further, the substandard work and the rectification done by the defendant company has also not been established. It is also the contention of the learned counsel for the plaintiff company that, if really there was a defective work on the part of the plaintiff company, subsequent contracts would not have been allotted to them in the year 2007. Ex.P8 Certificate issued by the defendant''s Site engineer and the evidence of D.W.1 would clearly prove that there was no substandard work. Hence, the learned counsel for the plaintiff company submitted that the plaintiff company is, certainly, entitled for recovery of amount as prayed for.

In support of his arguments, the learned counsel for the plaintiff company has relied on the judgments reported in AIR 1988 SC 1007 (Major (Retd.,) v. Inder Singh Rekhi); 2014 ILR (Kar.) 1152 (Mysore Minerals Limited v. Tam-Tam Pedda Guruva Reddy); 2013 (31) S.T.R. 537(All.) (Bhagwati Security Services v. Union Of India) and (The Bombay Dyeing and Manufacturing Co. Ltd., v. I.R. Enterprises)

On the contrary, it is the contention of the learned counsel for the defendant company that time limit has not been prescribed in the work orders. Therefore, the suit ought to have been filed within three years from the date when the work was completed. It is the further contention of the learned counsel for the defendant company that though the work was completed in March 2008, the suit was filed only on 23.06.2011, which is beyond the period of three years and hence,it is barred under Article 18 of the Limitation Act. It is submitted by the learned counsel for the defendant company that though the plaintiff company has stated that the final bill was raised by them on 10.6.2008, the same has not been filed before the Court. Even assuming that the bill was raised on 10.6.2008, the suit ought to have been filed on or before 10.6.2011 but the same was filed only on 23.6.2011, which is also beyond the period of three years.

It is the submission of the learned counsel for the defendant company that the bill dated 25.06.2008 is only a revision of the Final Bill dated 10.06.2008 for a sum of Rs.14,97,978.41p and the same is not certified by the defendant company''s Site engineer. It is submitted by the learned counsel for the defendant company that in Ex.P5, letter dated 25.06.2008, the plaintiff has also admitted the rectification done by the defendant company. Further, P.W.1 in his cross examination also admitted about the rectification done by the defendant company. All these facts clearly indicate that the plaintiff company has not constructed the building as agreed. It is submitted by the learned counsel that the defendant company had carried out the rectification work and made payment after deducting the said amount. Hence, it is the submission of the learned counsel for the defendant company that the suit is not maintainable. It is also the submission of the learned counsel for the defendant company that as the plaintiff company has withheld the Bill dated 10.06.2008, adverse inference has to be drawn against them. Thus, the learned counsel for the defendant company prayed for dismissal of the suit.

In support of the above contentions, the learned counsel for the defendant company has relied on the judgments reported in (2008) 17 SCC 491 (Bachhaj Nahar v. Nilima Mandal and Another); (2011) 12 SCC 695 (National Textile Corporation Limited v. Nareshkumar Badrikumar Jagad and Others); (2012) 5 SCC 306 (Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran); (State Of Maharashtra v. Hindustan Construction Company Ltd.) 2010 (3) CTC 452; (Shri Satender Kumar v. Municipal Corporation Of Delhi and Another) 2010 (168) DLT 15; (Ashok Kumar v. The State Of A.P.); and (S. Jesuraj v. M.A.R.Sathiyagu And Others).

In the light of the above submissions, this Court has to analyse the issues framed by this Court.

Issue Nos. 1 to 4:

The suit has been filed for recovery of a sum of Rs.32,77,718.14p. It is the contention of the plaintiff company that they were awarded work order for commercial project on 13.07.2006 for the value of Rs.1,17,98,260/-. Subsequently, the supplementary works were awarded by way of work Orders dated 02.11.2007 and 13.11.2007 for the very same project to the value of Rs.3,83,300/- and Rs.6,96,100/- respectively. According to the plaintiff company, they have constructed the building as per the specification of the defendant company, for which the bills were also raised from time to time. Further, Inspection of the project at every stage was done by the defendant company by its Field Site Engineer. Though the plaintiff company have raised final bill in the month of March 2008, since retention amount was omitted to be mentioned in the said bill, they have raised final and revised bill on 25.06.2008 for a sum of Rs.16,09,781.14p.

Admittedly, there is no dispute with regard to the awarding of contract. There is also no dispute with regard to the completion of the project by the plaintiff company in the month of March 2008. The only dispute raised by the defendant company is that there was substandard work by the plaintiff company and that the suit is barred by limitation. Ex.P1, work order, is admitted by both sides. Ex.P1 clearly shows that in spite of the specific term stipulated in the agreement to complete the building on or before 31.3.2007, the project was completed only in the month of March 2008. This fact is also admitted by both sides. Further, in Ex P1, it is clearly mentioned that retention of 5% of value of each bill shall be deducted in each RA bill. 50% of the same shall be released in the final bill and the balance 50% shall be retained for the defects liability for the period of 12 months. It is also clearly mentioned in Ex.P1 that the retention amount shall carry no interest at any point of time. The above terms clearly indicate that only at the time of raising the final bill, the retention amount can be claimed.

In this context, it is useful to extract condition Nos. 9, 10, 17, 18 and 20 set out in Ex.P1, which reads as follows:

".. .. ..9. Retention of 5% of value of each bill shall be deducted in each RA Bill. 50% of the same shall be released in the final bill and the balance 50% shall be retained for the defects liability period of 12 months. The retention amount shall carry no interest at any point of time. .. .. ..

RA Bills shall be submitted for a value not less than 20 lacs .. .. ..

Any defective material brought to the site and indicated by the Architect/Consultant or Engineer in charge shall be removed from the site within 24 hours. .. ..

Any defective workmanship pointed out shall be rectified within 48 hours.

Taxes such as IT, ST and WCT shall be deducted. .. .. .."

Exs.P2 and P3 are the subsequent work orders given to the plaintiff company in the year 2007. Awarding of such work orders dated 02.11.2007 and 15.11.2007 clearly proved the fact that the time limit set out in Ex.P1 has not been strictly adhered to by the parties. In fact, they waived it. Ex.P4 is the letter dated 14.06.2008 sent by the defendant company enclosing the final bill Certification for Ex.P1 project. It is stated in Ex.P4 letter that all the rectification done by the defendant company has been debited in the final bill prepared by the plaintiff company. The plaintiff company has issued a revised bill dated 25.06.2008 for claiming a sum of Rs.16,09,781.14p. In the said bill, he has also deducted a sum of Rs.5,72,848.67p for some rectification done by the defendant company. Ex.P6, legal notice was also issued by the plaintiff company disputing the letter dated 14.06.2008 addressed by the defendant company. The plaintiff company has clearly explained its case in the legal notice. In the legal notice, they have stated that the defendant company''s Site Engineer, who inspected the work at every stage, was satisfied with the work done by the them and at any point of time, no defect was pointed out by the said Site Engineer as alleged in their letter dated 14.06.2008.

It is the contention of the learned counsel for the defendant company that only a sum of Rs.1,35,429.41p alone is liable to pay by the defendant company and the same is clearly stated in the reply notice issued by them under Ex.P7. Exs.D1, Minutes of the meeting of the Board of Directors of the defendant company is filed. Ex.D2 is filed by the defendant company to show that they obtained planning permission in the year 2006 itself. Ex.D3 series are filed to show that the Rectification work was done by the defendant company. Though the said documents are photocopies and originals have not been filed by the defendant company, the same have not been disputed by the plaintiff company. When Ex.D3 series, are carefully analysed, it is seen that, in fact, the Engineers of the defendant company have given a report with regard to Column size and stated that M15 concrete would be accepted as safe and the structure would be sound and stable. This report was given on 25.08.2007. It is also indicated that sub standard work as alleged by the defendant company is not correct.

Similarly, in Ex.D6, letter dated 14.06.2008, it is stated that the amount towards rectification work done by the defendant company has been debited in the plaintiff company''s final bill and the defendant company are liable to pay only a sum of Rs.1,25,429/-. Though the sum of Rs.13,5429.41p said to have been used for rectification work, the defendant company have not filed any documents to show the nature of the rectification done by them. Whereas Ex.D3 series, the opinion of Civil Aid Technoclinic Pvt.Ltd., shows that columns are safe. These facts clearly indicate that the defective construction as stated by the defendant company cannot be true at all. Furthermore, D.W.1 in his evidence, has also admitted that the defendant company has not made any written request to rectify the alleged defect.

It is to be noted that Ex.P1 contract, clearly shows that any defective workmanship shall be rectified within 48 hours. Similarly, if any defective materials pointed out by the defendant''s Site Engineers and Architect Consultant, on inspection, the same shall be removed within 24 hours. D.W.1, in his evidence, has also admitted that whenever Running Account bills were raised by the plaintiff company, the defendant company''s Site engineer would inspect the site, scrutinise and certify the same and thereafter only payments would be made. It is also admitted that construction works made by the plaintiff company were also inspected and certified by the Site engineers of the defendant company time and again. These facts clearly indicate that the alleged defective work has not at all been established. That apart, if really there was any defect in the construction work, definitely, the defendant company would not have awarded supplementary work orders in the year 2007. These facts cannot be ignored altogether. Similarly, D.W.1 has also admitted in the cross examination that at the time of taking delivery of possession of the property, the technical team did not point out any defects in the construction.

From the above oral and documentary evidence, it can be easily inferred that the defence taken by the defendant company that they debited some amount towards rectification in the bill has not been established, as the defendant company has not disclosed about the nature of the rectification done by them. Whereas the evidence of D.W.1 and the documents clearly indicate that there was no defects in the construction.

In the above background, now it has to be analysed whether the suit is barred by limitation as contended by the defendant company.

It is specifically agreed between the parties that the retention amount shall be deducted in each RA Bill and 50% of such deducted amount shall be released in the final bill and the balance 50% shall be retained for the defects liability for a period of 12 months. The plaintiff company themselves had deducted a sum of Rs.5,72,848.67 p with regard to some rectification in their bill dated 25.06.2008. The plaintiff company have also pleaded in their plaint that the retention amount was not included in the bill raised on 10.06.2008. By taking advantage of this omission on the part of the plaintiff company to include the retention amount in the bill dated 10.6.2008, the defendant company had issued a letter dated 14.06.2008, as if some amount was debited by the plaintiff company. In the letter dated 14.06.2008, calculation was given by the defendant company only in respect of Running Account Bill No.8. Merely because, some amounts have been omitted to be mentioned in the original bill dated 10.6.2018, that itself cannot be a ground to deny the entire liability.

It is to be noted that Final Running Account Bill was raised by the plaintiff company, including all the retention amount, only on 25.06.2008. Even thereafter, the amount has not been paid by the defendant company. Further, the receipt of the final bill is not in dispute. Therefore, non-payment of the alleged dues, from the date when the final bill was sent, by the defendant company itself will raise cause of action for filing the present suit for recovery of money. In this context, it is useful to refer the judgment of the Hon''ble Apex Court in Major (Retd.,) v. Inder Singh Rekhi (cited supra), wherein the Hon''ble Apex Court has held as follows:

".. .. .. It is true that on completion of the work a right to get payment would normally arise but where the final bills as in this case have not been prepared as appears from the record and when the assertion of the claim was made on 28th February, 1983 and there was non-payment, the cause of action arose from that date, that is to say, 28th of February, 1983. It is also true that a party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. .. .. .."

Similarly in the case of Mysore Minerals Limited v. Tam-Tam Pedda Guruva Reddy (cited supra), the High Court of Judicature Karnataka by following the judgment of the Delhi High Court reported in (1987) 2 ALR 73 (Ram Ditta Mal v. Food Corporation) has held that the period of limitation will not start running from the date of completion of work or the non-payment of running bills. The cause of action will arise only after the respondent is intimated of the preparation of the final bill or his having accepted the payment.

In the case of The Bombay Dyeing and Manufacturing Co. Ltd. v. I.R. Enterprises cited supra, the High Court of Bombay has held as follows:

" .. .. .. A perusal of the impugned Award indicates that the learned Arbitrator has rendered a finding that an amount of Rs.9,15,603/- which was deducted towards five percent retention money would be payable only after completion of work and not before. It is held that the cause of action for claiming the amount deducted towards the retention money could arise only after the work had been completed. It is further held that further part payment was made by the petitioner to the respondent on 31st March 2008 whereas the Arbitration Agreement was invoked on 29th March 2011 and thus, claim was within the period of limitation. .. .. .. ".

Having regard to the above judgments and also considering the oral and documentary evidence adduced on both sides, this Court is of the view that the contention of the defendants that final bill was raised by the plaintiff company on 10.6.2008 cannot be sustained for the simple reason that the above bill has not been finally prepared and in fact, there was omission with regard to the retention amount in the said bill and that the final bill was prepared and sent only on 25.06.2008 after including the retention amount. The suit has been filed by the plaintiff company on 23.06.2011 i.e., within three years from the date of the final bill prepared by the plaintiff company. Therefore, this Court hold that the suit is well within the period of limitation.

Insofar as the judgments relied on by the learned counsel for the defendant company in the case of Ashok Kumar v. The State Of A.P and Shri Om Parkash v. Govt. Of Nct Of Delhi and Another are concerned, the said judgments are not applicable for the facts of the present case in view of the ratio laid down by the Hon''ble Apex Court in Major (Retd.,) v. Inder Singh Rekhi cited supra. Admittedly, in this case final bill was prepared only on 25.06.2008 and hence, the suit, which has been filed on 23.06.2011 is well within the period of limitation.

As already discussed above, as regards the rectification and other aspects, the defence taken by the defendant company has not been established. The plaintiff company have raised the bill on 25.06.2000 for the sum of Rs.16,09,781.14 p which includes retention amount, after deducting a sum of Rs.5,72,848.67 for rectification. Besides the plaintiff company have also paid a sum of Rs.5,72,848.67 towards service tax to the defendant company. In this regard, the evidence of D.W.1 is carefully perused, he has stated in his evidence that the defendant company have not deposited service tax to the Department. If the defendant company have not deposited such amount, it is the duty of the defendant company to return the amount to the plaintiff company. But at the same time, even though D.W.1 has admitted that the defendant company have not paid the service tax, the plaintiff company has not filed any materials to show that whether they have paid any service tax to the Department as per law. Therefore, the plaintiff company''s contention that they are entitled for a sum of Rs.5,72,848.67 towards service tax cannot be entertained. As such, the plaintiff is not entitled for a sum of Rs.5,72,848.67 which has been claimed by them towards service tax. At the most, the plaintiff company are entitled to the amount towards the final running account Bill dated 25.06.2008 i.e. Rs. 16,09,781.14.

Insofar as the judgment relied on by the learned counsel for the defendant company in the case of S. Jesuraj v. M.A.R. Sathiyagu and Others cited supra is concerned, in the said case, this Court has held that the plaintiff cannot take shelter under the defence raised by the defendants. Admittedly, in this case, the plaintiff company in their pleadings itself have clearly established their case. Therefore, the said judgment is not applicable to the facts of the present case.

Similarly, as regards the judgment relied on by the learned counsel for the defendant company in the case of National Textile Corporation Limited v. Nareshkumar Badrikumar Jagad and Others cited supra is concerned, absolutely, there is no dispute with regard to the proposition laid down in the said case. In the said Judgment, the Hon''ble Apex Court has held that unless factual foundation has been laid in the pleadings no argument is permissible to be raised. In the case on hand, there is no additional ground raised by the plaintiff company rather than the materials already submitted on record. In the plaint pleadings as well as in the evidence, the plaintiff company has clearly established that the Final Running Account Bill was raised by them only on 25.06.2008. Therefore, the judgment relied on by the learned counsel for the defendant company will not help the facts of the present case.

As already stated above, the plaintiff company are entitled to the amount towards the final running account Bill dated 25.06.2008 i.e. Rs. 16,09,781.14. Though he has claimed interest at the rate of commercial transaction, i.e. 24% interest, taking into consideration the reduction of interest in the banks, I am inclined to award interest at 12% on 16,09,781.14 p from 25.06.2008 to April 2011 and thereafter at 6% from the date of the suit till the date of realisation. These issues are answered accordingly.

In the result the suit is decreed on the above terms. There shall be no order as to costs.